Optimism on UK economy may prove premature, S&P says

Recent optimism regarding the possibility that the impact from Brexit on the UK economy will be short-lived may prove misplaced in the longer-term, a top ratings agency said.

Data now suggested the UK had shaken off the 'Brexit blues' but the outlook remained cloudy, Standard&Poor's economist Sophie Tahiri said in a statement.

"While the news is encouraging, we believe it has no bearing on the cloudy longer-term outlook for the U.K. economy," she diagnosed.

Economic reports on the British economy referencing the month of August suggest the hit to the economy may have been a temporary reaction and less severe than many had thought, "Unfortunately, it doesn't categorically rule out any negative short-term impact."

The S&P economist referenced the July and August readings for the country's purchasing managers indices, which in her opinion were consistent with broadly stagnant levels of economic activity over that same time horizon.

"The uncertainty surrounding the U.K's future outside of the E.U. and the associated economic risks, which we think are pronounced and predominantly skewed to the downside, will gradually take its toll, particularly on investment, as businesses start dealing with the new Brexit reality," she said.

Post-Brexit resilience was also a factor in the European Central Bank's decision to keep its policy coordinates unchanged at its last meeting, according to S&P.

Nonetheless, Tahiri still expected the ECB would act when the governing council gathered in December, viewing an extension of its QE programme to certain equities as a "distinct possibility".